"Made in Texas"

Oil Sign Policy - Buy Local!

History

The history of oil, autos and Texas are forever intertwined. With the discovery of one of the largest oil strikes at Spindletop outside of Beaumont in 1901, the oil industry has led much of the job creation in Texas. There is an opportunity to leverage the significance of this industry, along with our Texan pride, to further job growth and to create the investment dollars needed to transition to alternative energies.

Production and Processing

Texas holds approximately 40% of US oil reserves. Additionally, Texas produces almost four million barrels of crude oil per day, representing 40% of production in the US. If Texas was a nation, it would rank among the top five oil producing countries in the world, ahead of Kuwait, Canada and the United Arab Emirates.

In addition, Texas boasts 30% of the country’s crude oil-refining capacity. The state’s 30 petroleum refineries can process almost 5.7 million barrels of crude oil per day. Together, they comprise the largest refining center in the US. The refined products are shipped by interstate pipeline, barge and tanker to market.

With 28 million people, Texas consumes 3.7 million barrels of oil each day, leading the nation. After the industrial sector, the transportation sector accounts for the second largest share of energy consumption in Texas, in part because of the size of the state and the sheer volume of motor vehicles on the road.

We need to leverage our state’s reserves, production, refining, and infrastructure to spur job growth. These are competitive advantages, and we must translate them into a better quality of life for all Texans. The way to do that is to increase demand for Texas oil, and we have the ability to do it.

Texas is too big for small thinking: Oil Sign Policy

We can grow demand for Texas oil by requiring the 10,000 gas stations in Texas to display a sign stating the percentage of their gasoline that is sourced from Texas. Given the strong pride Texans share, we believe Texans will choose to buy gasoline from those stations with the higher percentage of Texas oil. With this initiative, we can create a virtuous circle of more Texans buying Texas oil, thereby creating more Texas jobs. Just like “Made in USA” tags on t-shirts, “Made in Texas” signs at gas stations will spur in-state gasoline consumption. This approach is a win-win for Texas. We expect to see a 15% to 20% increase in consumption over the next few years of Texas-originated fuel, which will generate approximately 200,000 new jobs during Andrew’s term in office.

20,000 to 30,000 new jobs created in direct activities, such as exploration, production, construction, and refining; and

138,000 to 207,000 new jobs created through indirect and induced employment, such trades as logistics, medicine, retail, lodging, and professional services.

And, every new gallon of Texas fuel sold is one less gallon made from Russian or OPEC sources. Let’s invest our dollars in Texas, so we can build the next generation of Texas schools, hospitals and highways. It’s possible that our Oil Sign Policy could create a premium market price for west Texas crude, which would further increase production.

We will use this same structure to encourage diesel production from Texas crude. Importantly, we will do the same with ethanol production to create agricultural jobs around the corn industry in Texas. The estimated jobs created in this brief analysis do not include diesel or ethanol assumptions.

Last, I will work to convince the federal government to pass similar legislation across the United States. With this in effect, the Oil Sign Policy will more than double the jobs estimate.

How It Works

The movement of crude from oil field to refinery to storage and ultimately to retail gas station includes many steps. Currently, crude oil’s origination is not tracked, although the seller, quantity, type, and cost are closely followed by a sophisticated supply chain system. This system can be modified to track the crude oil’s origination.

And, every new gallon of Texas fuel sold is one less gallon made from Russian or OPEC sources. Let’s invest our dollars in Texas, so we can build the next generation of Texas schools, hospitals and highways. It’s possible that our Oil Sign Policy could create a premium market price for west Texas crude, which would further increase production.

We will use this same structure to encourage diesel production from Texas crude. Importantly, we will do the same with ethanol production to create agricultural jobs around the corn industry in Texas. The estimated jobs created in this brief analysis do not include diesel or ethanol assumptions.

In general, Texas crude is delivered from the field via truck, rail or pipeline to the refinery. Every load includes a manifest. The manifest will include the crude oil’s origination. Once delivered, the refinery may then blend crude from different sources in order to produce gasoline. The Texas crude percentage will be adjusted based on the blending ratio. As a simplistic example, two equal batches are blended. One is Texas crude, and the other is Venezuelan. The new batch becomes 50% Texas crude.

The refinery may store the final product in above ground storage tanks. Again, similar to the prior example, the various gasoline supplies in the storage tank will adjust the Texas crude percentage, and this percentage will be calculated to the extent practical. We will work with the Railroad Commission of Texas and industry leaders to develop a practical and effective solution. We expect that mineral right owners, drillers, refiners and resellers -- all fellow Texans, in addition to being economically tied to the oil energy market -- will also be interested in finding ways to increase Texas production to create hundreds of thousands of jobs for our state. More jobs creates a larger market for everyone.

The purpose of this White paper is not to detail every challenge that refiners and resellers will face. We will need to perform additional research to understand the exact requirements, including appreciating that refineries are built with specific crude characteristics. So, switching different crude blends can require significant investment. We will work with refiners and resellers to reach an efficient solution. For example, since the day-to-day mixtures used by any reseller may differ greatly, a satisfactory solution might be to display a quarterly average percentage of Texas crude.

My Oil Sign Policy is just one example of how, as governor, we will create a million new jobs in the next five years.